Press Release No. 05/21

Press Release: IMF Executive Board Reviews Noncomplying Purchase Made by Burkina Faso, Acknowledges Corrective Actions, and Grants Waiver of Nonobservance

February 4, 2005

On February 2, 2005, the Executive Board of the International Monetary Fund (IMF) discussed Burkina Faso's noncomplying purchase in connection with a performance criterion under the three-year Poverty Reduction and Growth Facility (PRGF) arrangement. After reviewing the circumstances of the noncomplying purchase and the authorities' corrective actions, the Executive Board granted a waiver of two incidents of nonobservance of the performance criterion.

The noncomplying purchase occurred at the time of the second disbursement under the PRGF arrangement (see Press Release No. 03/82), when Burkina Faso reported that it had observed a continuous performance criterion, under which the government agreed not to contract or guarantee any nonconcessional external debt. Subsequent to the second disbursement, however, IMF staff determined that Burkina Faso had entered into two loan agreements that did not adhere to the terms of the performance criterion.

The Executive Board decided to waive two incidents of nonobservance of the criterion, on the basis of the relatively minor impact of the two loans on Burkina Faso's external debt burden, the corrective actions undertaken by the authorities to ensure that nonconcessional loans are not contracted or guaranteed in the future, and the authorities' continuing commitment to program objectives.

Following the Executive Board Discussion of the misreporting, Anne O. Krueger, First Deputy Managing Director and Acting Chair, stated:

"The Executive Board reviewed a noncomplying purchase made by Burkina Faso under its Poverty Reduction and Growth Facility Arrangement with the Fund, which arose as a result of misreporting of data to the Fund regarding the contracting or guaranteeing of non-concessional external debt.

"The Executive Board regretted the authorities' failure to provide accurate data, which was the result of administrative weaknesses in public expenditure management. The contracting of non-concessional debt was of particular concern in light of the sharp increase in Burkina Faso's external indebtedness since the country reached the completion point under the enhanced Heavily Indebted Poor Countries Initiative in 2002.

"However, in view of the prompt corrective actions taken by the authorities to ensure that non-concessional loans are not contracted or guaranteed in the future, and the authorities' strong commitment to achieving the program's objectives, the Executive Board decided to grant a waiver for the non-observance of the performance criterion that gave rise to the noncomplying purchase," Ms. Krueger said.